Merrill Lynch has upgraded Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) to "Buy" from "Neutral" with a target price of $33, a 21% premium on the share's closing price of $28.75 on the NYSE on Friday. The share closed at NIS 116 on the TASE yesterday.
Merrill Lynch says, "Despite the share price rallying 17% in the past month, we see two reasons to recommend purchase. First, we find a prospective 7.6% dividend yield compelling and, second, we see scope for additional cash returns with current net debt only 1.3 times earnings before interest, taxes, depreciation and amortization (EBITDA) and well below management comfort levels of 2.5 times."
Merrill Lynch has also raised its forecasts for the company on the basis of its financial results for the third quarter. The investment bank raised its 2007 EBITDA forecast by 2% to NIS 2.15 billion and its earnings per share forecast (EPS) by 20% to NIS 9.11.
Merrill Lynch adds. "We find Cellcom's combination of strong dividend yield with resilient robust top line growth compelling." It adds, "We see two potential catalysts for further possible upgrades. We believe that Israel should see similar data-driven average revenue per user (ARPU) support as witnessed in the US. Furthermore, we are optimistic that Cellcom can be a net beneficiary of number portability."
Merrill Lynch predicts that Cellcom will post a net profit of NIS 888 million on NIS 6 billion revenue in 2007 and a net profit of NIS 898 million on NIS 6.29 billion revenue in 2008.
Cellcom is a subsidiary of IDB Holding Corp. Ltd. (TASE:IDBH) through Discount Investment Corporation (TASE: DISI).
Published by Globes [online], Israel business news - www.globes-online.com - on November 19, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007